Rhodium beating platinum to palladium on car sales

The glass industry cut consumption to a 14-year low of 19,000 ounces in 2009, a year after prices climbed to a record. Demand will rise 4.9% in 2013 and climb every year to 96,000 ounces in 2016, according to SBG.

Rhodium slumped 88% from a record $10,100 set in 2008 as manufacturers cut the amount used in each autocatalyst and increased recycling to reduce costs.

Even after this year’s gains, rhodium’s premium to palladium fell to $515, about 95% less than the difference in 2008. It trades at a $340 discount to platinum, compared with a premium of $8,007 in 2008.

“We like the fundamentals and we do see rhodium prices going higher,” said Justin Froneman, an analyst at SBG in Johannesburg. “The absolute demand for rhodium will continue. It’s coming off a low base.”

Rhodium is less available than other precious metals. About 21 metric tons will be mined this year, compared with 182 tons of platinum and 202 tons of palladium, according to SBG. The volume of shares traded in Deutsche Bank’s rhodium-backed exchange-traded product in London in the past year is less than 2% of the amount for ETF Securities Ltd.’s platinum and palladium products in the city.

Rhodium ETPs

Deutsche Bank introduced the ETPs since May 2011 in London and Frankfurt and they now hold 62,400 ounces valued at about $78 million, according to data from the Frankfurt-based bank. That compares with the 1.66 million ounces of platinum and 2.16 million ounces of palladium held in ETPs globally, data compiled by Bloomberg show.

Older cars now being scrapped will add to supply. Recycled metal will jump 11% this year and keep climbing through 2016, SBG predicts. Europe’s fading debt crisis still poses a risk to demand. European Union car sales fell to the lowest level for a January in at least 23 years, the Brussels-based European Automobile Manufacturers’ Association said Feb. 19.

“The economic recovery hasn’t fed through yet,” said Robin Bhar, an analyst at Societe Generale SA in London. “There are sufficient above-ground stocks so it’s not a market that should tighten up appreciably.”